1 08..PV_3142 FILED IN CLERKS OFFICE OCT ("SLUSA"), 15 U.S.C. 78bb(f), and, thus, Plaintiffs' claims should be dismissed.

Transcription

1 L Case 1:08-cv JOF Document 2 Filed 10/07/2008 Page 1 of 5 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ORMAN C. ALLEN and HARVARD V. HOPKINS, JR., individually and on behalf of all others similarly situated, V. Plaintiffs, FILED IN CLERKS OFFICE U.S.D.C. Atlanta OCT JAMES N. HA EN Clerk ark INTEGRITY BANCSHARES, INC., STEVEN M. SKOW, SUZANNE LONG, DOUGLAS G. BALLARD II and ROBERT F. SKEEN, III, Civil Action File No PV_3142 Defendants. DEFENDANTS' MOTION TO DISMISS Defendants Integrity Bancshares, Inc. ("Integrity"), Steven M. Skow, Suzanne Long, Douglas G. Ballard II, and Robert F. Skeen, III (collectively, "Defendants"), respectfully move for an order dismissing with prejudice the claims of Plaintiffs Orman C. Allen and Harvard V. Hopkins, Jr. (collectively, "Plaintiffs") against Defendants asserted in their Complaint. As set forth in the Memorandum of Law submitted herewith, Plaintiffs' state law claims are preempted by the Securities Litigation Uniform Standards Act ("SLUSA"), 15 U.S.C. 78bb(f), and, thus, Plaintiffs' claims should be dismissed.

2 Case 1:08-cv JOF Document 2 Filed 10/07/2008 Page 2 of 5 WHEREFORE, Defendants respectfully request that their Motion be granted and that the Court grant any and all further relief as it deems just and proper. Respectfully submitted this 7th day of October, ohn L. Latham Georgia Bar No john.latham@alston.com Jessica P. Corley Georgia Bar No jessica.corley@alston.com Kerry K. Vatzakas Georgia Bar No kerry.vatzakas@alston.com ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, GA Telephone: (404) Facsimile: (404) Counsel for Integrity Bancshares, Inc. and Suzanne Long -2-

3 Case 1:08-cv JOF Document 2 Filed 10/07/2008 Page 3 of 5 &&" ^KWa W e h4. Anthony. Cochran Georgia Bar No alc@cclblaw.com CHILIVIS, COCHRAN, LARKINS & BEVER, LLP 3127 Maple Drive, NE Atlanta, Georgia Telephone: (404) Facsimile: (404) Counsel for Robert E. Skeen Aaron Danzig " V Georgia Bar No aaron.danzig@agg.com Henry R. Chalmers Georgia Bar No henry. chalmers@agg.com ARNALL GOLDEN GREGORY LLP th Street NW Suite 2100 Atlanta, Georgia Telephone: (404) Facsimile : (404) Counsel for Douglas G. Ballard -3-

4 Case 1:08-cv JOF Document 2 Filed 10/07/2008 Page 4 of 5 Steven E. Hudson, Esq. Georgia Bar No shudson@kilpatrickstockton.com Monifa Wright Georgia Bar No mwright@kilpatrickstockton.com KILPATRICK STOCKTON 1100 Peachtree, Street, # 2800 Atlanta, Georgia Telephone: (404) Facsimile: (404) Counselfor Steven M Skow -4-

5 Case 1 : 08-cv JOF Document 2 Filed 10/07/2008 Page 5 of 5 CERTIFICATE OF SERVICE I hereby certify that on this 7th day of October, 2008, I served a true and correct copy of Defendants ' Motion to Dismiss by U.S. first-class mail, postage prepaid, to: Jay D. Brownstein, Esq Montreal Road Tucker, Georgia Counselfor Plaintiffs Qssica P. Corley Georgia Bar No

6 Case 1 : 08-cv JOF Document 2-2 Filed 10/07 /2008 Page 1 of 10 FILED INCLER S OFFICE OCT UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION JAMES N. HATTEN, BY. Clerk Deputy Clerk ORMAN C. ALLEN and HARVARD V. HOPKINS, JR., individually and on behalf of all others similarly situated, Plaintiffs, V. INTEGRITY BANCSHARES, INC., STEVEN M. SKOW, SUZANNE LONG, DOUGLAS G. BALLARD II and ROBERT F. SKEEN, III, Defendants. Civil Action File No. 1 nil ^a+,,t)" MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS Plaintiffs' claims, which are premised on alleged misrepresentations related to the purchase or sale of "covered" securities, are barred by the Securities Litigation Uniform Standards Act ("SLUSA"), 15 U.S.C. 78bb(f). Plaintiffs' claims fall directly within SLUSA' s explicit language. Accordingly, Plaintiffs' Complaint must be dismissed. I. PROCEDURAL BACKGROUND Plaintiffs Orman C. Allen and Harvard V. Hopkins, Jr., individually and purportedly on behalf of all other persons similarly situated, ("Plaintiffs") filed the

7 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 2 of 10 f present action on September 12, 2008, in the Superior Court of Fulton County, State of Georgia, as Case No. 2008CV In their Complaint, Plaintiffs allege that they purchased certain securities issued by Integrity and that certain Securities and Exchange Commission ("SEC") filings by Integrity contained materially false and misleading statements regarding Integrity's financial and operating results. Plaintiffs seek to recover damages from Defendants under theories of violation of the anti-fraud provisions of Georgia securities law, common law fraud, and negligent misrepresentation and seek attorneys' fees. On October 6, 2008, Defendants removed the state court action to this Court pursuant to 28 U.S.C. 1441(a), 28 U.S.C. 1446, and SLUSA, 15 U.S.C. 78bb, which makes federal court the sole venue for class actions alleging fraud in the purchase and sale of covered securities, with certain limited exceptions that are inapplicable here. Defendants now move to dismiss this action on the grounds that it is preempted under SLUSA. II. ARGUMENT AND CITATION OF AUTHORITY Plaintiffs' asserted state law claims are prohibited by SLUSA. See 15 U.S.C. 78bb(f). SLUSA expressly provides that federal courts will have exclusive jurisdiction over, and federal law will be the sole basis for, claims asserting fraud and misrepresentation related to the purchase or sale of "covered" -2-

8 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 3 of 10 securities. Id. 78bb(f)(1). SLUSA provides for complete preemption of state law claims where, as here, a plaintiff seeks to prosecute an action covered by the statute.' See Behlen v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 311 F.3d 1087, (11th Cir. 2002). No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging- (A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or (B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security. 15 U.S.C. 78bb(f)(1). Accordingly, Plaintiffs' claims must be dismissed if they meet the following requirements: (1) the suit is a "covered class action," as defined by SLUSA; (2) Plaintiffs ' claims are based on state law; (3) "covered securities " have been purchased or sold; and (4) Plaintiffs allege that Defendants misrepresented or omitted a material fact in connection with the purchase or sale of such security. See Behlen, 311 F.3d at Because SLUSA provides for complete preemption of state law, the "wellpleaded" complaint rule is inapplicable to the Complaint. See Behlen, 311 F.3d at

9 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 4 of 10 As described below'. Plaintiffs' claims fall directly within the explicit language of SLUSA, and, thus, they should be dismissed as preempted by federal law. See Behlen, 311 F.3d at 1092 ("SLUSA preempts certain state law claims, allows for removal of state actions to federal court, and requires immediate dismissal of `covered actions."'). A. This Lawsuit is a "Covered Class Action " Under SLUSA. SLUSA defines "covered class actions " to include: (I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members. 15 U.S.C. 78bb( f)(5)(b) (emphasis added ). Plaintiffs ' Complaint seeks damages on behalf of a putative class "so numerous as to make it impracticable to bring all of them individually before the Court." See Plaintiffs' Complaint ("Pls. Compl."), 28. This case purports to be a class action on behalf of any and all persons and entities who purchased Integrity common stock, a nationally-traded stock, over a 14 month period between May 15, 2006 and July 31, 2007 (the "Class Period"). See Pls. Compl., 5, 26. Thus, Plaintiffs seek damages on behalf of well over 50 prospective class members. Plaintiffs further allege that the "issues that are (i) any single lawsuit in which- -4-

10 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 5 of 10 common among claims of the members of the putative class predominate over any individual issues. " Pis. Compl., 29. Accordingly, this action meets the definition of a "covered class action " under SLUSA. B. Plaintiffs Allege State Law Claims. Plaintiffs allege violations of the Georgia securities laws under O.C.G.A (a) (Count I), common law fraud under Georgia law (Count II), and negligent misrepresentation under Georgia law (Count III), and seek attorneys' fees under Georgia statutes (Count IV) See Pls. Compl., Thus, Plaintiffs' claims are based on state law. C. Plaintiffs' Claims are Based on the "Purchase or Sale of a Covered Security." A nationally-traded security is a "covered security" under SLUSA. See 15 U.S.C. 78bb( f)(5)(e) (adopting the definition of a "covered security " from 15 U.S.C. 77r(b), which includes nationally -traded securities ). Plaintiffs allege that "[a]t all times material hereto, Integrity was a public company with shares first trading over -the-counter and then the NASDAQ Global Market exchange..." Pls. Compl., 5. And, Plaintiffs allege that they purchased Integrity common stock during the Class Period. See Pls. Compl., Thus, the present action satisfies the "purchase or sale of a covered security" prong of the SLUSA preemption inquiry. -5-

11 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 6 of 10 D. Plaintiffs' Claims are Based on Integrity's Alleged Misrepresentations Or Omissions Made In Connection with Plaintiffs' Purchase of Integrity Common Stock. As noted above, SLUSA preempts state law claims purportedly based on "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security...." 15 U.S.C. 78bb(f)(1)(A). All of Plaintiffs' claims against the Defendants are based on allegations of false and misleading statements in connection with the purchase of Integrity stock. See Pls. Compl., 37, 45, 51 (alleging in Counts I, II, and III that, by virtue of Defendants ' alleged misrepresentations and omissions, the sales of Integrity common stock to Plaintiffs and members of the class were unlawful). The language of the Complaint demonstrates that these claims fall within SLUSA and are preempted. See Behlen, 311 F.3d at 1089 (affirming that preemption under SLUSA required dismissal of state law claims for breach of contract, breach of fiduciary duty, misrepresentation, suppression, unjust enrichment, and negligence, based on misrepresentations in connection with the purchase or sale of a security); Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334, 1347 (11th Cir ) (affirming dismissal under SLUSA where crux of complaint was that defendants made misrepresentations or omissions in connection with the purchase or sale of a covered security). -6-

12 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 7 of 10 For all of these reasons, SLUSA prohibits Plaintiffs ' claims and mandates their dismissal with prejudice.2 VIII. CONCLUSION For the foregoing reasons, Defendants respectfully request that the Court grant their Motion and grant any and all further relief as the Court deems just and proper. Respectfully submitted this 7th day of October, ohn L. Latham Georgia Bar No john.latham@alston.com Jessica P. Corley Georgia Bar No jessica.corley@alston.com Kerry K. Vatzakas Georgia Bar No kerry.vatzakas@alston.com ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, GA Telephone: (404) Facsimile : (404) Counsel for Integrity Bancshares, Inc. and Suzanne Long 2 Where, as here, amendment would be futile and the claims would continue to be preempted under SLUSA, dismissal with prejudice is warranted. See, e.g., Behlen, 311 F.3d at

13 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 8 of 10 Anthony V. Cochran Georgia Bar No alc@cclblaw.com CHILIVIS, COCHRAN, LARKINS & BEVER, LLP 3127 Maple Drive, NE Atlanta, Georgia Telephone: (404) Facsimile: (404) Counsel for Robert E. Skeen d AA "21 0 lalk 10 ulltlp, Aaron Danzig Georgia Bar No aaron.danzig@agg.com Henry R. Chalmers Georgia Bar No henry. chalmers@agg.com ARNALL GOLDEN GREGORY LLP th Street NW Suite 2100 Atlanta, Georgia Telephone: (404) Facsimile : (404) Counselfor Douglas G. Ballard -8-

14 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 9 of 10 Steven E. Hudson, Esq. Georgia Bar No shudson@kilpatrickstockton.com Monifa Wright Georgia Bar No mwright@kilpatrickstockton.com KILPATRICK STOCKTON 1100 Peachtree, Street, # 2800 Atlanta, Georgia Telephone: (404) Facsimile: (404) Counsel for Steven M. Skow -9-

15 Case 1:08-cv JOF Document 2-2 Filed 10/07/2008 Page 10 of 10 CERTIFICATE OF SERVICE I hereby certify that on this 7th day of October, 2008, I served a true and correct copy of Memorandum of Law in Support of Defendants ' Motion to Dismiss by U.S. first- class mail, postage prepaid, to: Jay D. Brownstein, Esq Montreal Road Tucker, Georgia Counsel for Plaintiffs f Avg 1664 assica. Corley Georgia Bar No